|Digital TV Development: Techno-Economic Analyses and Generic Modelling|
Technologies are transient. DTT/ HDTV delivery systems include ATSC, ISDB-T, DVB-T and DTMB. IPTV systems use ADSL/ ADSL2 and high speed ADSL2+/ VDSL2. Mobile TV can be delivered on T/S-DMB, DVB-H, MediaFLO, MPH, CMMB/ STiMi, T-MMB, DTMB broadcast systems, on 3G, 3.5G/ HSDPA, UMTS/ MBMS/ TD-CDMA (TDtv) cellular systems, or WiMAX/ WAVE2.
New digital systems will increasingly adopt MPEG4 Pt.10/ AVC/ H.264, VC-1/ WMV or AVS for video, and AAC/ HE-AAC v.2 for audio.
Generic Growth Equation and Methodology
Growth especially attaining the critical mass (the up-rising tipping point on the S-curve) within a few years is critical for investment.
A generic equation is postulated to facilitate the evaluation of growth factors. Driving Force, DF = Function of (soft and hard factors) = M (r, p, m, o) * H (G, g), where M = soft factor function (regulatory, pricing, marketing, other), and H = hard factor function (G for macroeconomics, g for geo-physical).
DF applies to the growth phase of the S-curve for technological diffusion. Hard factors are inherent constraints, before licensing, pricing, marketing discretionary actions come into effect. Macroeconomic factors include GDP, GDP-per-capita. Geo-physical factors are geographical/ physical limitations such as terrain or area. Microeconomic factors include the operators?behaviour. Content and consumer behaviour come under “o”. GDP-per-capita is significant if there is a sizable outlay, eg for an HDTV display, and/ or recurrent fee as in pay-TV, over 1-2 years. A significant outlay could 1-3 % of the GDP-per-capita. A penetration of 15% pa (or more) in the available market is strong; 5% pa or less is weak. DF is not static; it could be revised yearly.
Regulation can prevent market entries; hence minimizing barriers helps foster growth. International cooperation and IPR, ie transaction cost minimization, could in principle allow a digital TV system to be deployed worldwide, analogous to the Coase Theorem (Ronald Coase, 1959) in economics, on the allocation of property rights re radio frequencies. The generic equation may also be applied to future digital technologies.
If the technology is on the S-curve, ie in the growth phase, the proposed process is as follows. Market entry or adoption of a digital TV technology is a business decision; the baseline is a useful indication.
HDTV development has been explained (March 2006, Media Digest). Propelling Factor (HDF) = Mh (r,p,m,o) * (GDP * GDP-per-capita), where GDP is based on PPP, (GDP * GDP-per-capita) = Affordability factor, and Mh = a function of regulatory/ pricing/ marketing/ other factors. Hence, HDF = (Ar * Ap * Am * Ao) * (GDP * GDP-per-capita)
On the regulatory factor, there is also an economic element. Broadcasters may use their allocated TV spectrum for multi-channel DTT instead of HDTV. Spectrum is a scarce resource; it is “real estate in the sky”. Regulation is essential for an efficient use of available spectrum. On pricing, there is generally no subscription for receiving terrestrial HDTV. HDTV displays are decreasing in price, hence HDTV growth will escalate. On marketing, user education is vital. Of the other factors, the change from NTSC to ATSC is a quantum leap in quality. Providing attractive content that exploits the high quality and 16x9 aspect ratio is crucial.
IPTV (SD and HD) development has been explained (Dec. 2006, Media Digest). IPDF = Mi (r, p, m, o)* GDP-per-capita * Population Density = Mi (r, p, m, o)* GDP/population * population/ area = Mi (r, p, m, o) * GDP/ area
GDP/ area (ie US $billion/ sq. km, pa) is like annual crop yield in farming. GDP is computed yearly, hence it is similar to speed. IPDF applies only to a city-sized economy. On growth potential, the mentioned paper shows that a yield of 0.1 (US $billion per sq. km per year, PPP) is a useful benchmark; 0.1 (+/- 0.05) gives a medium yield whilst 0.16 or above a high yield. Narrowing a target area enriches the yield. Some cities have dual yields. For evaluating the growth potential for IPTV-HD, IPDF needs to be considered together with HDF. On the regulatory factor, licensing and cross-platform content flow-control are two major issues. To foster IPTV growth, regulatory restrictions should be minimized. Market competition is likely to be monopoly or oligopoly.
On pricing, a competitive bundling of services could entice consumers. IPTV could be considered as an "experience good". Penetration pricing is applicable, eg offering a mixed bundle of attractive channels plus broadband/ VoD/ VoIP and other value-added applications. IPTV also allows operators to deliver custom content and value-added services to targeted groups of consumers. The STB and the services are complementary goods.
On marketing/ promotion, consumer education is necessary. Promoting increases awareness and the perceived value of the services hence the demand. Consumers are often confused. Many consumers also wait for the prices to drop further and for better technologies to emerge. Promoting plus penetration pricing help bring in customers. On other factors, compelling content is crucial. Interactivity, shopping, games and VoD could be offered.
Mobile TV is complex; it covers spectrum, standards, handset designs and pricing, market competition, viewing habits, reception reliability, etc. For Mobile TV, Propelling Factor (MDF) = Mm (r, p, m, o) * GDP-per-capita* T, where T = Terrain Factor (0 < T =< 1) that includes concrete buildings and hills. MDF applies only to a city-sized economy.
T is a retarding factor, critical for pay services. Depending on frequency, eg VHF for T-DMB or UHF for DVB-H, the number of transmitters already deployed provides an indication. By combining satellite, terrestrial or cellular networks, T can be enhanced. T approaches 1 if the terrain is quite flat. Indoor reception is an important issue; UHF standing-waves could be useful for indoor reception. A reduced T, say 0.7 instead of 0.9, means a retarded subscriber growth. For T = 0.5, or lower, the terrain is very rugged. Transmission coverage is subjected to the law of diminishing returns in economics.
On the regulatory side, there could be government intervention or, conversely, a market-driven arrangement. Issues include the RF spectrum usage, licensing for broadcast mode and cellular mode operations, technical standards, etc.
On pricing, handset designs and costs are critical, eg battery life, antenna size, weight, screen size, channel switching/ signal recovery times, frequency bands, etc. Pricing is reduced if there is a subsidy. A free-to-air model is beneficial initially for attaining the critical mass, before introducing a pay model. Market competition is likely to be oligopoly. It is economically advantageous for operators to share a mobile TV network.
On marketing, promotion could exploit the young generation’s attraction to fashionable handset designs/ styles and to cultivate consumer habits. Other issues include content offerings (eg news, drama, sport, interactivity, clips of compelling content including UGC), consumer habits, handset availability and features.
A "mixed-mode" could be deployed, ie with the forward path in broadcast mode and a cellular network for the return path. When the generic equation is applied to this model, r, p, m, o and T become “composite” factors. The cellular network (with a higher coverage) can supplement the broadcast mode with 3G/ 3.5G video. Pricing covers both the downloaded content and cellular network usage (by time/ MB), for a win-win revenue sharing model.
The generic equation may be applied to other digital technologies; for 2K/ 4K D-Cinemas, the driving force DDF depends partly on an economy’s ability in creating culturally relevant D-cinema (DCI/ SMPTE/ ISO) grade movies. It is postulated that DDF = Md (r, p, m, o) * GDP. Currently, USA (with Hollywood’s influence) and EU lead the initial global growth, followed by some Asian countries.
■ John Yip
Radio Television Hong Kong
Digital TV Development: Techno-Economic Planning Considerations
(Acknowledgement: adapted from presentation at DTV Symposium, ABU, March 2007.)
Table 1: hard and Soft Factors
Table 2: "Other" soft factors